Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, pro...

Pargo Company is preparing its master budget for 2017. Relevant
data pertaining to its sales, production, and direct materials
budgets are as follows.

Sales. Sales for the year are expected to total 1,500,000
units. Quarterly sales are 22%, 23%, 24%, and 31%, respectively.
The sales price is expected to be $38 per unit for the first three
quarters and $45 per unit beginning in the fourth quarter. Sales in
the first quarter of 2018 are expected to be 15% higher than the
budgeted sales for the first quarter of 2017.

Production. Management desires to maintain the ending
finished goods inventories at 25% of the next quarter’s budgeted
sales volume.

Direct materials. Each unit requires 2 pounds of raw
materials at a cost of $11 per pound. Management desires to
maintain raw materials inventories at 10% of the next quarter’s
production requirements. Assume the production requirements for
first quarter of 2018 are 495,000 pounds.

Prepare the sales, production, and direct materials budgets by
quarters for 2017.

How do I determine the beginning finished goods inventory for Q1
in the production budget?

Feb 17 2018 03:00 AM

1 Approved Answer

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Parvez A
answered on August 07, 2018

2112 answers so far

5 Ratings,
(9
Votes)

Sales budget is given below:

Working note:

Calculations required for the preparation of sales budget are given below:

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